Insurance Wordings
From PIA
Monday, 15th November 2010 4:56 pm
Great care needs to taken with insurance clauses although not necessarily directed a professional indemnity insurance policies, this can apply to most insurance clauses, for instance the ‘Relical Clause’ as an example include the proposal form as part of the contract, which if not completed correctly may cause problems later, where an insurer could decide a claim based on the fact that the professional indemnity proposal submitted was on a material fact and if there were non disclosed or inaccurately described activity the insurer would be entitled to void the policy.
Insuring clauses for professional indemnity insurance policies this generally lays out the scope of the insurance for the clients. Here is an example of a leading insurers policy wording for professional indemnity insurance miscellaneous class:
https://secure.professionalinsuranceagents.co.uk/docs/pi_misc_civil_aoc_01_08.pdf
Claims Made Policies
It would be true to say that nearly all professional indemnity insurance business is arranged on a ‘claims made basis’ where as other liability insurances are made on a loss occurring basis, where claims can come from actual damage which occurs during the policy period this type of cover can cause problems with ‘long tail’ possible claims, particularly where the damage is not discouraged until years later.
The ‘claims made’ cover also has areas you may need to consider for instant where the policy holder for a professional indemnity insurance policy say a accountants or architects, have to make sure that they do not obtain any gaps in their covers, or back cover retro cover may well not be in place, PII generally has to be on a continuous basis, so both insurer and insured have to be very aware or the risks that carry in the insurers case, claims could very well occur out of work done by the insured in a period prior to the policy year, and underwriters need to be aware and have full disclosure and have any knowledge of claims and circumstance that may lead to a claim, late notifications to any previous insurers can also be a problem.
Professional Indemnity Insurance policies, all have general conditions and because there are so many varieties and different policy wordings there are the main areas perhaps to consider.
Claims notification the importance to notify in time, we set out such procedures as follows:
https://secure.professionalinsuranceagents.co.uk/docs/Claims_Procedures.pdf
What circumstances that are likely to give rise to a claim.
If the insured is offered cover by an insurer there is a responsibility to the insurer to notify them immediately and without delay any claims or circumstances they may lead to a claim. If this is not done it is quite possible that the insurer could decline the claim for late notification.
Voiding a Professional Indemnity Policies
It is very possible that in the event that a client has misrepresented or declared incorrect information on the original application/proposal form, that they could void the policy from inception, particularly if there has been fraudulent non disclosure activity.
Excess Deductable
Very often a professional indemnity policy will have an excess, this means that the client purchasing the policy would have to pay a set amount towards any claims that were made against them before the insurance policy would drop into cover the indemnity originally set. This can be based on an ‘any one claim’ plus costs and expenses, an any one claim including costs and expenses there are of course many varieties of how the excess of deductible works.
Limit of Indemnity
When purchasing a (PII) policy you need to choose a level of cover suitable for your business needs, very often the major professions have set levels that you have to buy based on the various regulators requirements, all the traditional professions normally have set levels. Where professional indemnity is purchased by companies or individuals outside the traditional professions levels can vary, however most contracts now require £1,000,000 certainly banks, local authorities, large companies and corporation require their sub contractors or professional adviser to hold that type of level.
